- by New Deal democrat
As per usual for the week after the employment report, there is no new data until Wednesday’s CPI report. So let’s take a further look at some of the information from Friday’s report, as well as several other reports from last week in the goods-producing and sales sector.
In the 40 years after WW2, when goods producing jobs peaked, so did the economy. That is less so now, but goods producing jobs are still typically the first to weaken.
In Friday’s report, goods producing jobs declined. In the past year, only 39,000 such jobs have been added (blue, right scale below) in the entire economy, or only a 0.2% gain (red, left scale):
While this is weak, in the past 40 years typically it has taken an actual YoY decline in goods producing jobs to be consistent with the onset of a recession:
Another leading indicator in the goods producing sector is car sales (blue, left scale in the graph below), and even more so heavy truck sales (red, right scale):
Historically heavy truck sales have gone down first, and by more than 10% - typically about 20% - before a recession has begun. Heavy truck sales are just reaching that drop off:
The surge in car sales was front-running the tariffs. With that done, a more significant drop off in those as well is likely.
Last week we also saw a decline in new orders for durable goods (gold) and core capital goods (red). But perhaps even more importantly, orders for consumer durables (blue) also declined:
This is significant because consumer goods orders typically decline closer to recessions than durable goods orders for manufacturing. Here is the pre-pandemic record of all three, with the YoY levels normed to the current YoY reading:
The data is very noisy, but in the past 30 years YoY changes like at the present have been associated at very least with very weak expansions, if not on the cusp of contractions.
The one big contrary indicator, as I wrote on Friday, is in the construction sector, where jobs have been added almost every single month in the past several years:
Here is what the long term YoY picture is for both total construction (blue) and residential construction job (red):
All 3 of the pre-COVID recessions in the past 40 years have been preceded by an outright decline in residential construction jobs, and at very least a sharp deceleration in the growth of other construction jobs. By contrast, at present the former is up over 2% YoY and the latter about 1.5%.
The continued strength in residential construction employment is particularly surprising, given the decline in housing permits, starts, and units under construction. But until they turn down, the goods producing sector is mainly indicating weakness rather than outright contraction.
